The ART Of Business

Do Quality Standards Force Jobs Overseas?

In our book The Distribution Trap, Timothy Wilkinson and I identified a trap many manufacturers fall into when they outsource the sales and distribution of their innovations to "Mega distributors". Because of the pressure to constantly reduce prices, manufacturers ultimately end up in the trap of commoditization and offshoring.

I'm wondering if a similar trap might exist for small American manufacturers in the quality systems area.

The requirement to have a certified system, such as ISO 9001, TS 16949, or NADCAP, is seemingly pushed onto many small manufacturers by "Megas" in various industries.

Under the guise of "Quality", the Megas use the market data they gain in the evaluative process against the same suppliers in their price negotiations. As a result, the Megas are able to spread each manufacturer's competitive advantage across their supplier base; ultimately commoditizing their supplier's innovations and extracting "everyday lower prices".

This then lowers the small manufacturer's incentive to innovate- reducing actual product quality- and raises their costs associated with maintaining the standards, which puts greater pressure on operating expenses and, finally, leads to the offshoring of manufacturing jobs to cheaper labor markets.

What do you think?

TAGS: Supply Chain
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